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Mexico Trade & FDI

Mexico Trade

Mexico is a major participant in international agricultural trade. In the broad category of agri-food products (Chapters 1-24 in the Harmonized System), Mexico's total exports (to all countries) approached $22.5 billion in 2012. Corresponding imports in 2012 totaled about $26.5 billion. The United States is Mexico's largest agri-food trading partner, buying 75 percent of Mexican exports and supplying 73 percent of the country's imports in this category.

Agricultural trade between Mexico and the United States encountered a turning point in the late 1980s when Mexico emerged from a period of economic difficulties and adopted a series of trade reforms. In 1986, Mexico agreed to join the General Agreement on Tariffs and Trade (GATT), the predecessor to the World Trade Organization. In the early 1990s, Mexico lowered a number of agricultural trade barriers, and in 1994, Mexico joined Canada and the United States in implementing the North American Free Trade Agreement (NAFTA). In addition, Mexico has forged trade accords with about 50 other countries.

With a growing population, an expanding economy, and a more market-oriented agricultural sector, Mexico has become the second-largest agricultural trading partner of the United States (following Canada) in terms of exports and imports combined. In 2012, Mexico accounted for 13.4 percent of U.S. agricultural exports and 15.9 percent of imports, as defined and categorized by USDA. Between 1993 (the last year prior to NAFTA's implementation) and 2012, U.S. agricultural exports to Mexico expanded at a compound annual rate of 9.1 percent, while agricultural imports from Mexico grew at a rate of 9.9 percent. Greater price volatility for many agricultural commodities has caused the total value of U.S. agricultural exports to Mexico to fluctuate more widely over the past 6 years (2007-12).

U.S.-Mexico agricultural trade is largely complementary, meaning that the United States tends to export different commodities to Mexico than Mexico exports to the United States. Grains, oilseeds, meat, and related products make up about three-fourths of U.S. agricultural exports to Mexico. Mexico does not produce enough grains and oilseeds to meet internal demand, so the country’s food and livestock producers import sizable volumes of these commodities to make value-added products, primarily for the domestic market.

Roughly two-thirds of U.S. agricultural imports from Mexico consist of beer, vegetables, and fruit. These imports are closely tied to Mexico's historical expertise in producing alcoholic beverages and a wide range of fruit and vegetables, along with favorable climates whose growing seasons largely complement those of the United States. For example, many produce items that the United States does not grow in winter are grown by Mexico in winter.

Mexico FDI

Mexico is the third-largest host country for U.S. direct investment in the global food and beverage industries, and it also has attracted foreign direct investment (FDI) in production agriculture. Many of these investments were initiated following implementation of the North American Free Trade Agreement (NAFTA) in 1994. The agreement contains many provisions designed to facilitate foreign investment, including equal treatment of foreign and domestic investors and prohibition of certain performance standards--such as a minimum amount of domestic content in production--for foreign investments. However, Mexico really began to open up to foreign investment in the 1980s, when the country first relaxed and then eliminated rules for most sectors of the economy that limited foreign ownership of Mexican businesses.

U.S. direct investment in Mexico is substantial in the food and beverage industries, but much smaller in production agriculture. According to data from the U.S. Department of Commerce's Bureau of Economic Analysis (BEA), the U.S. direct investment position in Mexico on a historical-cost basis (i.e., the stock of direct investment) was about $3.6 billion in the food industry in 2011, $4.2 billion in the beverage industry in 2010, and $375 million in crop and animal production combined in 2007. More recent statistics for crop, livestock, and beverage production are suppressed in order to avoid the disclosure of the data of individual companies. While there are important individual instances of Mexican direct investment in the U.S. food industry, BEA does not report data describing the sum of these investments, again in order to avoid disclosure of the data of individual companies.

The U.S. direct investment position in the Mexican food and beverage industries has expanded greatly during the NAFTA period, rising from a total for the two industries of about $2.3 billion in 1993 to about $8.7 billion in 2007, before declining to about $7.5 billion in 2010 (see line graph below). The beverage industry accounts for much of these changes, with its stock of investment climbing from about $1.0 billion in 1993 to about $5.8 billion in 2007 and then decreasing to $4.2 billion by 2010. In contrast, the U.S. direct investment position in the Mexican food industry declined from about $3.0 billion to about $1.3 billion between 1997 and 1999 and has experienced fairly steady growth since then, reaching about $3.6 billion in 2011.

The current composition of U.S. direct investment in the Mexican food industry parallels the composition of U.S. agricultural exports to Mexico, in which grains and oilseeds are among the most prominent commodities in terms of total export value. As seen in the pie graph below, grain and oilseed milling accounted for about 69 percent of the U.S. direct investment position in Mexico's agricultural production and food industries in 2011. Animal production accounted for about 8 percent. Note that this pie graph does not include investments in agricultural production or the beverage industry, whose data for 2011 are suppressed.

BEA statistics for 1999-2011 provide insights into the long-term composition of U.S. direct investment in the Mexican agricultural, food, and beverage sectors, as well as some noteworthy changes in that composition (see table below). The beverage sector is consistently the largest component of this investment, typically accounting for over 60 percent of the U.S. direct investment position in these sectors in recent years. Much of the growth in U.S. FDI in the Mexican food industry took place in grain and oilseed milling, where the U.S. direct investment position expanded from $378 million in 1999 to about $2.5 billion in 2011--an increase of more than 530 percent. Other sectors where U.S. direct investment is prominent include sugar and confectionary products and animal production.

U.S. direct investment position in Mexican agricultural production and the food, beverage, and tobacco product industries, 1999-2010

Industry

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Dollars (millions)

TOTAL, agricultural production, food, beverages, and tobacco products

(D)

(D)

(D)

(D)

7,733

(D)

(D)

(D)

9,057

(D)

(D)

(D)

(D)

TOTAL, food, beverages, and tobacco products

(D)

(D)

(D)

6,502

7,571

6,975

7,756

(D)

8,682

7,989

6,857

7,494

(D)

Agricultural production

(D)

(D)

(D)

(D)

162

(D)

(D)

(D)

375

(D)

(D)

(D)

(D)

Crop production

(D)

121

27

(D)

23

(D)

38

(D)

51

(D)

64

69

(D)

Animal production

(D)

(D)

(D)

(D)

139

(D)

(D)

(D)

324

(D)

(D)

(D)

(D)

Food

1,281

1,427

1,250

2,159

2,134

2,203

2,790

2,610

2,835

2,497

2,956

3,246

3,618

Animal foods

70

74

76

23

(D)

12

8

7

7

7

7

7

7

Grain and oilseed milling

378

498

794

1,402

1,374

1,343

1,466

1,688

2,132

1,927

2,147

2,278

2,496

Sugar and confectionery products

63

68

(D)

73

72

144

149

134

138

85

98

143

137

Fruit and vegetable preserving and specialty foods

174

167

207

204

220

39

-13

-56

-53

-52

67

69

68

Dairy products

(D)

8

9

11

12

(D)

23

(D)

(D)

35

39

44

49

Animal slaughtering and processing

(D)

(D)

(D)

(D)

(D)

(D)

(D)

(D)

(D)

42

51

(D)

(D)

Bakeries and tortillas

(D)

(D)

426

(D)

91

-18

(D)

-7

10

-2

(*)

5

4

Other food products

287

273

-432

243

214

563

677

717

450

456

547

(D)

(D)

Beverages and tobacco products

(D)

(D)

(D)

4,343

5,437

4,772

4,966

(D)

5,847

5,492

3,901

4,248

(D)

Beverages

(D)

(D)

(D)

4,328

5,421

(D)

4,948

(D)

5,826

5,470

3,877

4,221

(D)

Tobacco products

40

76

14

15

16

(D)

18

24

21

22

24

27

0

Data are on a historical-cost basis.

(D) = Data not published in order to avoid disclosure of data of individual companies.